Steel Sector Faces Pressure on Clean Energy Shift

The steel industry, which contributes roughly 7% of global carbon dioxide emissions, faces mounting pressure to adopt cleaner energy solutions. With coal-powered blast furnaces still accounting for the majority of steel production, emitting around two metric tonnes of CO2 for every tonne of steel produced, the sector’s reliance on fossil fuels remains one of the hardest hurdles to overcome in the global transition to cleaner industries.

However, despite the availability of viable alternatives—such as electric arc furnaces (EAFs), which can be powered by renewable energy, and the development of green hydrogen to replace coal—many of the world’s largest steelmakers are yet to embrace these technologies on a significant scale. A recent survey by Action Speaks Louder (ASL), a Sydney-based climate group, reveals that several major steel producers continue to source almost all of their energy from fossil fuels, particularly during the 2022-2023 period. The survey’s findings reveal a stark contrast between the industry’s best performers and its laggards. SSAB, Sweden’s leading steelmaker, was a notable exception, with 19% of its energy sourced from renewables, setting a benchmark in the industry. In contrast, South Korea’s Hyundai Steel, Dongkuk Steel, and Posco, despite operating EAFs, reported virtually no renewable energy usage. This reflects a broader trend, where vested interests in fossil fuel infrastructure—such as pipelines and import terminals—are preventing these companies from making the necessary shift.

The transition to cleaner energy in steel production is often described as “hard to abate,” but experts argue that this perception masks underlying economic and structural challenges. According to Laura Kelly, ASL’s strategy director, the real issue is not technological feasibility but rather the affordability of new energy sources. With rising carbon pricing mechanisms set to increase costs for companies failing to make the shift, the pressure will only intensify. As Kelly points out, “If it is not hurting them financially now, it is hurting them strategically because they are lagging on that transition plan.” India’s JSW Steel and China’s Baosteel are also grappling with low renewable energy integration, both sourcing only 0.4% of their energy needs from renewables. However, they have set ambitious targets for the future, with JSW Steel aiming to run its operations entirely on clean energy by 2030. The lack of swift action could not only affect their competitiveness but also their long-term sustainability in an increasingly carbon-conscious global economy.

The steel industry, long seen as a cornerstone of industrialisation, now stands at a crossroads. With the global drive for sustainability becoming stronger, the time for a transformative shift to clean energy is fast approaching. Steelmakers that delay this transition risk both financial and reputational damage as stakeholders demand more sustainable practices.